LISBON — Portugal’s new Socialist government narrowly survived a key parliament vote Wednesday after its far-left allies rebelled over plans to sell off a failed bank with a cost of up to €3 billion for the taxpayer.

The government of Prime Minister António Costa managed to approve the bank sale only with support of the main center-right opposition party, after a morning of parliamentary drama underscored the fragility of the left-wing alliance that came to power November 26.

“The supposedly stable and coherent (governing) majority evaporated as the first problem appeared,” declared João Almeida, a conservative lawmaker. “They are not ready to resolve the country’s problems.”

Costa’s government agreed this week to sell off Banco Internacional do Funchal (Banif) to Spanish banking giant Santander for €150 million. But far left opponents called it a fire-sale. That’s because the resolution package for the ailing Portuguese bank includes a €2.26 billion injection of state cash and other costs to the taxpayer, as some prior payments to Banif will not be repaid.

Finance Minister Centeno blamed the collapse of Banif on inaction by the previous center-right government.

The government says the plan is the only way to safeguard depositors and financial stability.

Despite an expected hit of more than one percentage point of gross domestic product on the budget deficit, Finance Minister Mario Centeno insists it will not affect Portugal’s ability to meet the eurozone target of bringing the deficit below three percent of GDP.

Centeno blamed the collapse of Banif on inaction by the previous center-right government.

“This is the price we are paying for the current government having to do in three weeks what the previous didn’t do in three years,” he told parliament.

Yet he needed support from the center-right in Wednesday’s vote to approve the supplementary budgetary needed for the bank sale to go ahead.

Former Prime Minister Pedro Passos Coelho instructed lawmakers from his Social Democratic Party (which despite the name is center-right) to abstain in the vote, enabling the budget measures to pass despite opposition from the government’s allies in the Portuguese Communist Party and the radical Left Bloc.

Unexpected allies

Costa forged an unexpected and unprecedented alliance with the two far-left parties to kick out Passos Coelho, whose center-right coalition came first in October 4 elections, but without an absolute majority in parliament.

Doubts about the ability of the moderate Socialists to maintain a stable alliance with the radicals were widespread, but few expected an open break to come so quickly. Far-left lawmakers — who support state control of the banks — were determinedly opposed to the Banif deal.

“This plan is unacceptable. It doesn’t guarantee jobs and it hands taxpayers’ money over to Santander,” said Mariana Mortágua, a Left Bloc legislator. “The best alternative would have been to keep Banif in the public sphere.”

After the Socialists took power last month, Passos Coelho warned Costa he would not be able to count on center-right support when the far-left turned against the minority government.

However, the importance of Banif to Portugal’s financial stability and the bank’s key role in the Portuguese Atlantic island regions of Madeira and the Azores, meant the center-right felt obliged to let the government plan pass.

Leader of the Social Democratic Party Pedro Passos Coelho (left) with Socialist Party leader Antonio Costa (right) (FRANCISCO LEONG/AFP/Getty)

Banif is Portugal’s eighth-largest commercial bank with a balance sheet of €11 billion, but it is the leading lender in the two island regions, accounting for around a third of total deposits. It takes its name from its base in Funchal, Madeira’s capital city.

Three center-right lawmakers from Madeira joined the Socialists in voting for the rescue plan.

Costa’s government made the decision to resolve Banif as the bank’s share price tanked amid fears it would would go bust. It also wanted to act before the application of tighter EU rules on winding down banks that could impose losses on senior bondholders and depositor with over €100,000 in the bank.

In January 2013, the government provided €1.1 billion in rescue aid and loans to help Banif survive the economic crisis, and took a 60 percent stake in the bank. It became clear late last year that the bank was unable to pay back the loans in full. Over the course of 2015, the bank’s share price fell by over 60 percent.

It was not immediately clear what impact the far-left’s revolt over Banif will have on the governing alliance, but the opposition seems encouraged in its conviction that Costa’s rule will be short.

“The mask has fallen. Where is the stability and the durability promised in the (left-wing coalition) agreement?” asked Luís Montenegro, leader of the PSD parliamentary faction. “Where is the commitment of these parties to assure the stability of the government and the financial system?”